The Facts
Australian company and US company enter into agreement
In January 2016, two companies, one Australian-based and one US-based, entered an agreement under which the US company would provide social media marketing services to the Australian company. A dispute arose.
The written agreement between the two companies contained a conflict resolution clause providing that, in the event of a dispute which could not be resolved by the parties, either by themselves or with the assistance of a mutually agreed third party, the dispute would be referred to a cleric who was chief judge of a court established within a particular religion.
The director of the US company and the director of the Australian company were both practising adherents of that religion. The conflict resolution clause provided that the decision of the chief judge of the religious court would be “final and acceptable by both sides”.
Australian company terminates contract and US company seeks adjudication by religious court
Despite the existence of the dispute resolution clause, in July 2016 the Australian company ended the arrangement with the US company under a clause providing that it could terminate the contract by giving two months’ notice and making a payment.
However, the director of the US company remained aggrieved and, in the latter part of 2016, had discussions with other clerics of the religion, which culminated in a plan that the US company’s grievances should be adjudicated by this religious court, which had been in existence since 1905.
The claim brought by the US director before the religious court was for damages up to the amount of $5 million for breach of service and partnership agreements and fraudulent use of company funds.
Director of Australian company receives summons to religious court
Over the ensuing couple of months all manner of preparatory activities – filing forms, making payments, identifying people to be involved – went on between the director of the US company and various clerics of the religion.
In December 2016, a summons to the religious court was sent to the director of the Australian company and to members of his family, who were shareholders. (They were eventually removed as parties.)
Refusal to appear before religious court leads to threat of religious sanctions
Four days later, the lawyers for the director of the Australian company wrote to the religious court and said, while expressing respect, that their client had no intention of appearing at a hearing of the religious court and that, if the director of the US company had a “proper claim”, he should bring it in an appropriate civil court, in conformity with the rules of that court.
The response was rapid. One of the clerics wrote on behalf of the religious court that, if the director of the Australian company did not recant and submit, various formal sanctions would be imposed on him, which would have the effect of considerably curtailing his participation in services in the religion’s places of worship, and in the religious community generally.
The cleric’s advice said that these sanctions would be notified to the place of worship which the Australian director attended and that further sanctions might be imposed should his defiance persist.
Australian company director commences legal action in Supreme Court
Characterising this advice as intimidation, and being a threat of “partial excommunication”, the Australian director’s lawyers did not budge an inch.
The war of words went on until, in early February 2017, the lawyers for the Australian director started proceedings in the NSW Supreme Court, complaining of apprehended bias and seeking injunctive relief to restrain the religious court from hearing the dispute and from continuing to threaten the imposition of religious sanctions on the Australian director.
Subsequently, the claim was amended to include a claim that the clerics, by threatening the religious sanctions, had committed a contempt of court.
It was up to the Supreme Court to decide whether the clerics were indeed guilty of contempt of court.
Expert commentary on the court's decision
Supreme Court finds clerics guilty of contempt of court
In Live Group Pty Ltd & Anor v Rabbi Ulman & Ors [2017] NSWSC 1759, the judge said he was “not persuaded” that the Supreme Court had the power to intervene in the affairs of the religious court (called the “Beth Din”, and comprised of judges who were Jewish rabbis), although he said that he was in no doubt that the plaintiff had been denied procedural fairness.
There were ten “charges” of criminal contempt, which related to many aspects of the conduct of the director of the US company, Mr Jesse Kuzecki, and the rabbis. Most of these charges were dismissed.
However, two of the charges – the threat, effectively from the rabbis, to impose religious sanctions on the director of the Australian company, Mr Reuven Barukh, and a later email repeating the threats – were found by the judge to amount to criminal contempt.
This was because “as a matter of practical reality [they had] the tendency to interfere with the administration of justice” by attempting to coerce Mr Barukh into submitting to process of the Beth Din, and in so doing attempting to deter him from approaching the courts of New South Wales.
His Honour imposed a penalty of $20,000 on the chief judge of the Beth Din, Rabbi Moshe Gutnick, and penalties of $10,000 each on the other three rabbis.
Appeal court reduces monetary penalties but upholds findings of criminal contempt
On appeal to the NSW Court of Appeal, in Ulman v Live Group Pty Ltd [2018] NSWCA 338, the monetary penalties were found to be excessive and were reduced, because of the unlikeliness that the rabbis would re-offend, and because of the “extra-curial punishment” (ie punishment outside the court system) they had suffered, evidently being considerable damaging publicity arising from the initial judgment.
However, the findings of criminal contempt were upheld.
That the case arose at all may surprise some readers who might think the time-honoured separation of church and state was beyond any challenge. However, the decision reaffirms the primacy of the courts established as part of the apparatus of Westminster-style democracies.